Speech Notes: Finance Portfolio Committee Report and Budget 2020/2021

Issued by Retief Odendaal, MPL
Shadow MEC for Finance

Honourable Speaker,

Honourable Premier,

Leaders of Political Parties,

Members of the House

According to STATS SA, South Africa recorded a decline of 2% in Gross Domestic Product (GDP) in the first quarter of 2020. This data reflects only the first three months of 2020, before the nationwide lockdown was fully implemented.

These worrying statistics come on the back of the announcement by Finance Minister, Tito Mboweni, that the country will experience its worst recession in 90 years. The National Budget is set to have a deficit of 15.7% of GDP which will lead to our debt to GDP ratio increasing to a whopping 81.8% by the end of the current fiscal year.

Against this backdrop Speaker, Provincial Treasury must be very aware that this country and indeed this province is going to experience some very serious fiscal challenges over the next couple of years.

This is a fact that we cannot ignore and as such the support and guidance that Provincial Treasury provides to other departments is going to become increasingly important.

It is a huge concern that the audit opinions and as such, the financial performance of our provincial departments, are regressing. The Auditor General gave four of our departments qualified opinions for the financial year 2018/19. This makes it one of the worst financial performances by the province in recent history.

Speaker, given the trajectory of our economy and the difficult road that lies ahead, both during and post the COVID-19 pandemic, it cannot be acceptable that the financial controls within our departments are failing.

This is where Provincial Treasury can play an invaluable role in assisting these departments in strengthening their financial controls as well as ensuring that they see an improvement in their audit opinions. This however can only be done when Provincial Treasury has the necessary teeth to ensure that their advices and directives are adhered to by individual departments.

Little progress has for example been made with operational efficiencies in relation to wasteful or non-core service delivery related spending. Departments have for years continued to pay lip service to operational efficiencies whilst Treasury has been unable to force them to ensure that they put a stop to wasteful expenditure.

The current budget that we have before us is no exception and hundreds of millions of Rands has once again been budgeted for non-core service delivery related spending. It is the hope of course that the move to adopt a zero based budgeting model in the very near future will go a long way in dealing with wasteful expenditure.

Just as in the case with our provincial departments, local government in the Eastern Cape has also received woeful audit opinions. The financial affairs of municipalities in the Eastern Cape has regressed at an alarming rate during the 2018/19 financial year-delivering the worst audit results for the province in 6 years.

During the latest year under review, the Auditor General gave 9 municipalities disclaimers as the information provided by them was not sufficient to reach conclusive findings. This is the worst performance by Eastern Cape municipalities since 2012 and stands in stark contrast to last years’ results where only 3 municipalities received disclaimers.

In addition, the number of unqualified audits awarded to Eastern Cape Municipalities has regressed to 16, three down from 19 last year.

Whilst CoGTA and Provincial Treasury has a joint support program in place to assist municipalities struggling with audit related matters, it is clear that this program is not delivering the desired results as Eastern Cape municipal audit outcomes continues to regress.

In addition, the incidence of municipalities tabling unfunded and unrealistic budgets have also been a cause for concern. It is clear that many of our local governments unfortunately just do not have the necessary skills or expertise required in budgeting and related financial management processes.

Against this backdrop it is hugely concerning that the budget for Programme 5: Municipal Financial Governance has been reduced by 20.6% in the financial year at hand. The Democratic Alliance once again wants to caution the provincial government that local government in the Eastern Cape is collapsing and the support provided by this programme is absolutely imperative. As such we trust that additional funding will be made available in the Adjustments Appropriation so that the support provided in terms of this program can be increased.

Whilst we have a duty to stabilise our ailing local governments, we never seem to reward those local governments that manage their finances prudently, and who achieve unqualified or clean audits. In this regard, the Democratic Alliance once again proposes that we start considering implementing a Good Governance Grant for local government that could reward excellence in respect financial management in our municipalities.

Such a Good Governance Grant for preforming municipalities will no doubt be a welcome change for MEC Nqatha who must by now have become used to bailing out delinquent municipalities!

Speaker, in conclusion the Democratic Alliance wishes to thank Provincial Treasury for all the effort that they put into endeavouring to improve the financial controls of our provincial departments and municipalities alike.

It would stand the Premier and his Executive in good stead to ensure that Provincial Treasury receives the necessary support and associated powers so as to enable them to address the myriad of financial management problems that both provincial departments and local governments alike are facing.

The Democratic Alliance supports Vote 12.

I thank you